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Tag of the Month: Bootstrapping

The financing of a prospective company is one of the main issues for each founder. Basically, there are various financing options that can help young entrepreneurs to develop their idea into a viable business model. But especially at the beginning of a founding project, sufficient funds are often not available. In such a situation, one has to economize with one’s own resources. This behavior is also called “Bootstrapping” – derived from the word “bootstrap”.

“Bootstrapping” describes a conscious approach to setting up the company, in which the start-ups only work with their own capital in the development of their business, i. e., very limited budget and limited resources. Accordingly, the founders largely fund themselves.

How does it work?

If one wants to pursue the concept of “Bootstrapping” as a founder, one is bound to limited working conditions and on a tight schedule. The prevention or minimization of expenses while maximizing the revenue has the highest priority in the development process similar to the maximum principle.

“Bootstrappers” therefore follow the principle that a founder should begin with business operations in order to achieve the so-called break-even point as early as possible. Another goal is to generate a positive cash flow as soon as possible.

What are the benefits?

When applying bootstrapping when founding, it contributes to the personal development in all cases. Shortages of budget and resources are the mother of invention – such difficult situations often lead to creative ideas and developments in everyday business. The method trains the entrepreneurial skills in many ways.

A clear advantage of “Bootstrapping” with equity is that you – especially in the early stages of business development – “invest” no company shares for raising capital needs. If you should still be on the lookout for outside capital at a later date, bootstrapping experiences are often appreciated by potential investors. Bootstrapping stands for effective economical operations and business growth from within. The founders thus prove that they possess entrepreneurial skills and can apply them successfully.

For anyone interested, who wants to inform themselves about Bootstrapping in more detail, we have a reading tip. In his free e-book “The 1,000-Euro Startup“, Thorsten Kucklick writes about the Bootstrapping method and his experiences during his own founding.

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